Euro crisis: “Europe’s common currency is its formative element.”

Herman Van Rompuy told a news conference in St Petersburg, Russia that, by the next summit of EU leaders at the end of June, he and three other EU officials would present “the main building blocks for this deepened economic and monetary union” and “a working method to achieve this objective”.

“In those building blocks, banking integration is an important chapter… I will deal at this stage on supervision, on deposit insurance and on resolution,” Mr Van Rompuy said.

“So we are working on it. It is the beginning only of the work… and hopefully we can present results of that work already by the end of this year,” he said.

In the Irish Times, Derek Scally, notes Frau Bundeskanzlerin’s comments that “Europe will face a debate “sooner rather than later” over closer political union.”

Another challenge for the plan is to clarify what is meant by its proposed “fiscal union”. From Berlin’s perspective a fiscal union involves closer oversight of euro zone budgets – as regulated by the fiscal pact.

However, German officials know many others understand eurobonds – mutualised euro zone debt – to be a vital part of such a union. Berlin is likely to insist such a move can only come after institutional change as Germany’s constitutional court is likely to prevent any integration of social systems, or pooling of financial liability, until there is a clear boost of democratic legitimacy at EU level.

Where Berlin and Brussels are in agreement, insiders told the German newspaper, is that nothing can happen without further treaty change. With fiscal treaty ratification ongoing, that makes short-term progress on further integration unlikely.

Nevertheless, most officials involved in the talks – besides Brussels’ participants – seem prepared to push ahead with the reforms at euro zone level if necessary, creating a de facto two-speed Europe.

“The crisis is likely to come to a climax in the [autumn]. By that time, the German economy will also be weakening, so that Chancellor Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities.